Hollande victory may be pyrrhic

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SummaryWhen it ended a face-off with the world’s biggest steel company Friday evening, the French government cast the outcome as a job-saving victory.

When it ended a face-off with the world’s biggest steel company Friday evening, the French government cast the outcome as a job-saving victory. Despite an agreement between the French government and ArcelorMittal, the two blast furnaces at Florange will remain idled.

In return for the Socialist government’s dropping a threat to nationalise a steel making complex at Florange in northeast France, the company, ArcelorMittal, agreed to drop plans to lay off more than 600 workers at two blast furnaces there. ArcelorMittal also agreed to invest euro 180 million, or $234 million, in steel finishing operations at the same site over the next five years.

The deal does impose some unwanted expenses on the company, which is struggling financially in the weak global economy. But the bigger costs could prove to be the political ones the episode has created for the government of François Hollande, the French president, whose popularity was already on the wane.

Unions are angry that the government failed to follow through on its threat to nationalise the site in France’s former industrial heartland, and that the two blast furnaces under dispute will remain idled. Edouard Martin, head of the CFDT union at the site, accused the government of “having lied all along” about its intentions.

“Up until the last, we were led to believe a temporary nationalisation was a given,” he said in a radio interview Saturday. Meanwhile, French business leaders fear that the government’s threatened takeover of the plant, even if it did not come to pass, has sent a further chill through the global investment community following the Socialist government’s big tax increases for the rich.

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